Mongolia’s Parliament Approves Changes to Foreign Investment Law

April 19 (Bloomberg) -- Mongolia’s parliament approved an
amendment to its foreign investment law, easing some
restrictions on overseas private companies while maintaining
controls on state-owned groups, after a slump in investments.

The changes remove the need for parliament to review
investments by non-state owned companies, said Sereeter
Javkhlanbaatar, director of foreign investment at the Ministry
of Economic Development, by phone from Ulaanbaatar. Deals
involving state-owned companies or companies with government
equity will still need to be reviewed if the investment is more
than 49 percent.

The amendments may help to boost investor confidence
following protracted disputes with key Mongolian investors,
including Rio Tinto Group. Foreign direct investment in Mongolia
declined 17 percent last year and is down 58 percent in the
first two months of this year.

“The amendments are welcome but the damage has been done,
and many investors’ appetites have moved on to more stable
jurisdictions,” James Liotta a partner at Mahoney Liotta LLC in
Ulaanbaatar, said by e-mail. “Those who are locked in are
likely to take a much more conservative approach toward
investing in Mongolia.”

The law applies to companies in the strategic sectors of
mining, banking and media, Chimed Saikhanbileg, the government’s
cabinet secretary, said by phone from Ulaanbaatar. Today’s
changes only apply to parliamentary reviews for non-state owned
foreign companies and don’t remove the need for both state and
private companies in those sectors to get approval from the
government, the prime minister and his cabinet, for investments,
he said.